Revenue Sharing Cuts from Lansing Devastating to Michigan Cities

LANSING, Michigan – Fixing problems in the personal property tax (PPT) legislation passed late last year and ending more than a decade of annual cuts to local revenue sharing are top priorities of Michigan cities for the 97th state Legislature, mayors and other local government officials announced today.

“While the problems facing Michigan’s cities are the result of many factors, it is still a fact that the state government — legislatures and governors alike — have cut revenue sharing for local communities by more than $4.2 billion over the past dozen years. It is a fact that state government has taken those funds and used them to solve problems in the state budget or to pay for state programs and policies. And it is a fact that those cuts have contributed to thousands of local police officers and firefighters losing their jobs, reductions in road and bridge repairs, massive cuts to local parks and libraries, and much more,” said David Lossing, president of the League and mayor of Linden. “Michigan cities have been largely pushed aside by our state government for far too long, and anything short of an increase in statutory revenue sharing is not good enough.”

Gov. Rick Snyder has proposed no funding increases for statutory revenue sharing in his 2014 state budget, despite the massive cuts made to revenue sharing funding over the past decade.

In addition, legislation passed in December — on the final day of the last state Legislature’s session — would cut another stable source of local funding for local communities: the business personal property tax (PPT). This legislation would cut local PPT funding up to 20 percent in many communities, assuming Michigan voters approve a ballot question authorizing the PPT law to take effect. The Legislature has not voted to put the PPT law on the August 2014 statewide primary ballot.

Daniel Gilmartin, CEO and executive director of the Michigan Municipal League, said the PPT legislation passed in December created “several outstanding issues” that must be resolved.

“We delivered a letter to the Lieutenant Governor outlining the issues in the PPT bills that must be resolved, and we were told they would be resolved,” Gilmartin said. “It is essential that those issues be fixed, and anything short of that is not good enough. If they are not resolved, replacement funding to local communities would be threatened to the point of potentially causing irreparable and permanent fiscal damage to literally dozens or hundreds of Michigan cities.”

One outstanding issue is whether a key part of the PPT phase-out legislation (called the “essential services assessment”) is even legal. The essential services assessment is how the law proposes to allow cities to replace much of the PPT revenue being slashed. Another issue that must be resolved is how cities that have issued bonds for certain capital and infrastructure improvements are going to have the funds to repay them. The PPT phase-out legislation sharply lowers the revenues cities have historically used — and legally committed — to repay the bonds.

“In our discussions with the Lieutenant Governor, we were told this issue would be fixed after the first of the year. We are working with the administration to resolve these issues, and it is critical to the solvency of our communities to get this right,” said Samantha Harkins, director of state affairs for the League.

Harkins said Michigan cities are also concerned about the transportation funding proposals being considered by the Governor and Legislature. While the League supports a substantial increase in investments for transportation infrastructure and transit, any proposal that fails to increase funding to specifically address local infrastructure needs will not be good enough.

“Anyone who travels our local roads and state highways knows that Michigan’s transportation system and infrastructure are in deplorable shape and in desperate need of a major reinvestment,” said East Lansing Mayor Pro Tem Nathan Triplett. “The state must provide a level of funding that adequately addresses local transportation system needs. Inaction is not an option.”

Michigan Municipal League advocates on behalf of its member communities in Lansing, Washington, D.C., and the courts; provides educational opportunities for elected and appointed municipal officials; and assists municipal leaders in administering services to their communities through League programs and services.